DCIT, Ernakulam V. Reez Karakkattil Raghavan, Ernakulam

ITA 312/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64931 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: NITYANANDA KAMATH
• Section: 194C

Judgement Text

1 ITA NO.312/COCH/2011 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 312/COCH/2011 (ASSESSMENT YEAR 2006-07) THE DY.CIT, CIR.2(2) VS SHRI REEZ KARAKKATTIL RA GHAVAN ERNAKULAM FRIENDS TRANSPORT COMPANY 11/100, AMBALAMUGHAL PO ERNAKULAM 682 302 PAN : ABDPR7295J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M ANIL KUMAR RESPONDENT BY : SHRI NITYANANDA KAMATH DATE OF HEARING : 10-10-2012 DATE OF PRONOUNCEMENT : 16-11-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX(A)-II, KOCHI DATED 24-01 -2011 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. SHRI ANIL KUMAR, THE LD.DR SUBMITTED THAT THE TA XPAYER HIRED LORRIES FOR CARRYING GOODS AND PAID HIRE CHARGES. HOWEVER, THE TAXPAYER HAS NOT DEDUCTED TAX A REQUIRED U/S 194C OF THE ACT. ACCOR DING TO THE LD.DR, HIRING 2 ITA NO.312/COCH/2011 OF LORRY FOR CARRYING THE GOODS AMOUNTS TO WORK AND THE TAXPAYER IS LIABLE TO DEDUCT TAX AS PROVIDED IN SECTION 194C OF THE ACT. THE LD.DR HAS PLACED HIS RELIANCE ON THE JUDGMENT OF THE KERALA HIGH COURT IN CBDT VS COCHIN GOODS TRANSPORT ASSOCIATION (1999) 236 ITR 993 (KER). ON A QUERY FROM THE BENCH, WHETHER THE TAXPAYER HAS SIMPLY HIRED THE LORRY OR HAS ENTRUSTED THE WORK OF CARRYING THE GOODS BY THE LORRY OWNERS, THE LD.D R CLARIFIED THAT THE TAXPAYER SIMPLY HIRED THE LORRY AND THE WORK OF CAR RYING THE GOODS WAS NOT ENTRUSTED TO THE LORRY OWNERS. ACCORDING TO THE LD .DR THE TAXPAYER SIMPLY HIRED THE LORRY AND PAID HIRE CHARGES. ON A QUERY FROM THE BENCH, THE LD.DR CLARIFIED THAT THE PROVISIONS OF SECTION 194-I FOR DEDUCTION OF TAX IN RESPECT OF HIRE CHARGES IS NOT APPLICABLE FOR THE YEAR UNDE R CONSIDERATION SINCE SECTION 194-I WAS INTRODUCED SUBSEQUENT TO ASSESSME NT YEAR UNDER CONSIDERATION. 3. ON THE CONTRARY, SHRI NITYANANDA KAMATH, THE LD. REPRESENTATIVE FOR THE TAXPAYER HAS SUBMITTED THAT THE TAXPAYER IS A T RANSPORT CONTRACTOR. IN THIS CASE, THE TAXPAYER HAS SIMPLY SUPPLIED TRUCKS TO M/S LOGOS LOGISTICS PVT LTD ON HIRE BASIS. SINCE THE TRUCKS OWNED BY THE T AXPAYER WERE NOT SUFFICIENT ENOUGH FOR GIVING THEM ON HIRE TO M/S LO GOS LOGISTICS PVT LTD, THE TAXPAYER HIRED LORRIES FROM OTHER TRUCK OWNERS AND GAVE THEM TO M/S LOGOS LOGISTICS PVT LTD FOR USING IN THEIR BUSINESS. ACC ORDING TO THE LD.REPRESENTATIVE, THE TAXPAYER WAS NOT ENTRUSTED W ITH THE WORK OF CARRYING ANY GOODS. THE TAXPAYER HAS SIMPLY HANDED OVER THE TRUCKS ON HIRE TO M/S LOGOS LOGISTICS (P) LTD AND RECEIVED HIRE CHARGES. M/S LOGOS LOGISTICS PVT LTD USED THE LORRY IN THEIR BUSINESS OF CARRIAGE OF GOODS FROM ONE PLACE TO ANOTHER. THEREFORE, THE WORK OF CARRIAGE OF GOODS WAS NEITHER ENTRUSTED TO 3 ITA NO.312/COCH/2011 THE TAXPAYER NOR TO THE LORRY OWNERS FROM WHOM THE LORRIES / TRUCKS WERE TAKEN ON HIRE. THERE WAS NO CONTRACT FOR CARRYING OUT ANY WORK. ACCORDING TO THE LD.REPRESENTATIVE, THE TAXPAYER IS NOT LIABL E TO DEDUCT TAX U/S 194C OF THE ACT. THE LD.REPRESENTATIVE FURTHER SUBMITTED T HAT THE TAXPAYER PAID BATA TO THE DRIVERS AND ALSO INCURRED EXPENDITURE F OR DIESEL. THE LORRY / TRUCK OWNERS HAVE SIMPLY HANDED OVER THEIR VEHICLES ON PAYMENT OF HIRE CHARGES AND THEY HAVE NOTHING TO DO WITH ANY OTHER WORK. IN FACT, M/S LOGOS LOGISTICS (P) LTD USED THE LORRIES / TRUCKS F OR CARRIAGE OF GOODS IN THEIR BUSINESS. ACCORDING TO THE LD.REPRESENTATIVE, AT T HE BEST, IT CAN BE SAID THAT USAGE OF VEHICLE ON PAYMENT OF HIRE CHARGES. ADMIT TEDLY THE PROVISIONS OF SECTION 194-I OF THE ACT IS NOT APPLICABLE DURING T HE YEAR UNDER CONSIDERATION. THEREFORE, THE TAXPAYER IS NOT LIAB LE TO DEDUCT TAX. THE LD.REPRESENTATIVE HAS PLACED HIS RELIANCE ON THE DE CISION OF THE VISAKHAPATNAM BENCH OF THIS TRIBUNAL IN MYTHRI TRAN SPORT CORPORATION VS ASSIST.COMMISSIONER OF INCOME-TAX (2010) 124 ITD 40 (VISAKHA). THE LD.REPRESENTATIVE FOR THE TAXPAYER FURTHER SUBMITTE D THAT EVEN ASSUMING FOR ARGUMENT SAKE THAT THE LORRY OWNERS ARE TREATED AS A SUB CONTRACTORS EVEN THEN THE TAXPAYER IS NOT LIABLE TO DEDUCT TAX. ACC ORDING TO THE LD.REPRESENTATIVE, THE TAXPAYER IS NOT THE MAIN CON TRACTOR. THE MAIN CONTRACTOR IS ADMITTEDLY M/S LOGOS LOGISTICS PVT LT D. AT THE BEST, THE TAXPAYER CAN BE TERMED AS SUB CONTRACTOR. THEREFOR E, A TRANSACTION BETWEEN SUB CONTRACTOR AND ANOTHER SUB CONTRACTOR W OULD NOT ATTRACT PROVISIONS OF SECTION 194C AT ALL. THE LD.REPRESEN TATIVE HAS PLACED HIS RELIANCE ON THE DECISION OF THE MUMBAI BENCH OF THI S TRIBUNAL IN HCC-L&T PURULIA JOINT VENTURE VS JCIT IN ITA NO 1644/MUM/20 10 & 4 ITA NO.312/COCH/2011 3041/MUM/2010 DATED 24 TH JUNE, 2011, COPY OF WHICH IS AVAILABLE AT PAGE 38 OF THE PAPER BOOK. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY, THE TAXPAYER HAS HIRED LORRIES / TRUCKS FROM THE LORRY OWNERS AND GA VE THEM ON HIRE TO M/S LOGO LOGISTICS PVT LTD WHO USED THE SAME FOR CARRIA GE OF GOODS. IT IS NOT THE CASE OF THE REVENUE THAT THE WORK OF CARRIAGE OF GO ODS WAS ENTRUSTED WITH THE LORRY / TRUCK OWNERS FROM WHOM THE LORRIES / TR UCKS WERE TAKEN ON HIRE OR THE TAXPAYER. THE WORK OF CARRIAGE OF GOODS REM AINED WITH M/S LOGOS LOGISTICS PVT LTD ONLY. THE TAXPAYER HAS SIMPLY SU PPLIED THE TRUCKS / LORIES TO M/S LOGOS LOGISTICS PVT LTD. THEREFORE, IT IS N OT A CASE OF CONTRACTOR FOR CARRYING OUT ANY WORK. 5. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 194C OF THE ACT. SECTION 194C OF THE ACT WOULD BE APPLICABLE W HEN A PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENTS FOR CARRYING OUT ANY WORK INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WOR K IN PURSUANCE OF A CONTRACT AT THE TIME OF PAYMENT OR CREDITING THE SA ID AMOUNT. THE LEGISLATURE WITH EFFECT FROM 01-04-1995 INSERTED EX PLANATION 4(C) TO INCLUDE THE TERM WORK CARRIAGE OF GOODS OR PASSENGERS B Y ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS. THEREFORE, THE C ONTRACT SHALL BE FOR CARRIAGE OF GOODS OR PASSENGERS OTHER BY RAILWAY. IN THIS CASE, ADMITTEDLY, THE CARRIAGE OF GOODS WAS NOT ENTRUSTED WITH THE LO RRY / TRUCK OWNERS FROM WHOM THE TAXPAYER HAS HIRED THE LORRIES / TUCKS OR WITH THE TAXPAYER 5 ITA NO.312/COCH/2011 HIMSELF. ADMITTEDLY THE RESPONSIBILITY OF CARRIAGE OF GOODS REMAINS WITH M/S LOGOS LOGISTICS PVT LTD. NO WORK OF CARRIAGE O F GOODS WAS ENTRUSTED EITHER WITH THE TAXPAYER OR WITH THE LORRY / TRUCK OWNERS FROM WHOM THE TAXPAYER HIRED THE LORRIES / TRUCKS. THEREFORE, TH ERE IS NO CONTRACT FOR CARRIAGE OF GOODS BETWEEN THE TAXPAYER AND THE LORR Y / TRUCK OWNERS FROM WHOM THE TRUCKS / LORRIES WERE HIRED. AS SUCH, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT PROVISIONS OF SECTION 194C ARE NOT APPLICABLE TO THIS TRANSACTION. 6. WE HAVE CAREFULLY GONE THROUGH THE DECISION OF T HE VISAKHAPATNAM BENCH OF THIS TRIBUNAL IN THE CASE OF MYTHRI TRANSP ORT CORPORATION (SUPRA). IN THE CASE BEFORE THE VISAKHAPATNAM BENCH OF THIS TRIBUNAL, THE TAXPAYER, A CONTRACTOR UNDERTOOK TO TRANSPORT BITUMEN FROM ON E PLACE TO ANOTHER. FOR CARRYING OUT THE CONTRACT OF TRANSPORT OF BITUM EN, THE TAXPAYER ENGAGED LORRIES FROM VARIOUS OTHER PEOPLE. IN THESE FACTUA L CIRCUMSTANCES, THE VISAKHAPATNAM BENCH OF THIS TRIBUNAL FOUND THAT PAY MENT MADE FOR HIRE OF VEHICLES WOULD NOT FALL WITHIN THE CATEGORY OF PAYM ENT TOWARDS SUB CONTRACT WITH LORRY OWNERS. THEREFORE, THE VISAKHA PATNAM BENCH OF THIS TRIBUNAL HELD THAT THE TAXPAYER WAS NOT LIABLE TO D EDUCT TAX U/S 194C OF THE ACT. ONE OF US, THE ACCOUNTANT MEMBER IS A PARTY T O THE DECISION OF THE VISAKHAPATNAM BENCH OF THIS TRIBUNAL. 7. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE KERALA HIGH COURT IN COCHIN GOODS TRANSPORT ASSOCIATION (SUPRA) . IN THE CASE BEFORE THE KERALA HIGH COURT, THE QUESTION AROSE FOR CONSIDERA TION WAS WHETHER A 6 ITA NO.312/COCH/2011 TRANSPORT CONTRACT FOR MERE CARRIAGE OF GOODS WITHO UT LOADING AND UNLOADING FACILITY WOULD AMOUNT TO CARRYING OUT ANY WORK WITHIN THE MEANING OF SECTION 194C(1) OF THE ACT. THE KERALA HIGH COURT, AFTER ANALYZING VARIOUS CASE LAWS INCLUDING THE JUDGMENT O F THE APEX COURT IN ASSOCIATED CEMENT CO LTD (1991) 201 ITR 435 (SC), F OUND THAT A CONTRACT FOR CARRIAGE OF GOODS WITHOUT LOADING AND UNLOADING FAC ILITY IS A TRANSPORT CONTRACT SIMPLICITOR, THEREFORE, IT WOULD FALL WITH IN THE AMBIT OF SUB SECTION (1) OF SECTION 194C OF THE ACT. IN THE CASE BEFORE US, ADMITTEDLY, THERE IS NO CONTRACTOR FOR TRANSPORT OR CARRIAGE OF GOODS. IT IS A MERE HIRING OF VEHICLE FOR USING THE SAME IN THE CARRIAGE OF GOODS BY M/S LOGOS LOGISTICS PVT LTD. THE LORRY / TRUCK OWNERS WERE NOT ENTRUSTED WITH AN Y WORK OF CARRIAGE OF GOODS. THE DIESEL BILL AND THE BATA TO DRIVERS ARE PAID BY THE TAXPAYER. THEREFORE, IT IS NOT A CASE OF CONTRACT FOR CARRIAG E OF GOODS. HENCE, THE JUDGMENT OF THE KERALA HIGH COURT IS NOT APPLICABLE TO THE FACTS OF THIS CASE. IN THE ADMITTED FACTS OF THE CASE IT IS A SIMPLE CA SE OF HIRING THE LORRY / TRUCK AND PAYMENT OF HIRE CHARGES, THEREFORE, AT THE BEST , IT WOULD FALL U/S 194-I OF THE ACT. SINCE THE PROVISIONS OF SECTION 194-I IS ADMITTEDLY NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION, THE TAXPAYER IS N OT LIABLE TO DEDUCT TAX ON PAYMENT OF HIRE CHARGES TO THE LORRY / TRUCK OWNERS . 8. MOREOVER, THE TAXPAYER HAS ADMITTEDLY PAID HIRE CHARGES TO LORRY OWNERS. THE SPECIAL BENCH OF THIS TRIBUNAL AT VISA KHAPATNAM IN THE CASE OF MERLYN SHIPPING & TRANSPORTERS VS A.C.I.T. IN ITA N O.477/VIZAG/2008 ORDER DATED 29 TH MARCH, 2012 HAS ELABORATELY CONSIDERED THIS ISSUE IN RESPECT OF AMOUNT PAID ON OR BEFORE THE LAST DAY OF THE FINANC IAL YEAR AND IT WAS HELD 7 ITA NO.312/COCH/2011 THAT THE AMOUNT WHICH WAS ALREADY PAID CANNOT BE A SUBJECT MATTER OF DEDUCTION U/S 40A(IA) OF THE ACT. THE SPECIAL BENC H OF THIS TRIBUNAL FOUND THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS APPLICABLE ONLY IN RESPECT OF THE AMOUNT WHICH REMAINS TO BE PAID AT T HE END OF THE FINANCIAL YEAR AND IS NOT APPLICABLE TO THE AMOUNT ALREADY PA ID. 9. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF THE LOWER AUTHORITY AND THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH NOVEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 16 TH NOVEMBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH